This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Fed Tightens Oversight on Insurance, Non-Bank Financials

Stocks in this article: AIG PRU MET

NEW YORK ( TheDeal) -- The Federal Reserve Board this week established a rule that to enable financial regulators to determine which non-bank financial firms are critical to the financial system, and which will be required to submit to additional government oversight.

The rule approved Wednesday defines when a company is "predominantly engaged in financial activities." Non-bank financial firms that meet the definition will be subjected to consolidated supervision by the Federal Reserve if the Financial Stability Oversight Council designates them as "systemically important financial institutions."

A firm will be considered significant if it has $50 billion or more in total consolidated assets or has operations or risk exposures that the FSOC believes will harm the U.S. financial system if the institution fails.

Banks and bank holding companies already face substantial oversight from federal regulators and there is less controversy surrounding the designation of banks and their holding companies as SIFIs.

Establishing which nonbank companies are eligible to be deemed SIFIs removes a key hurdle to the FSOC making its designations. The Dodd-Frank Wall Street reform law enacted in 2010 established that the FSOC can designate a nonbank firm for supervision by the Federal Reserve only if it is "predominantly engaged in financial activities."

Under the rule announced Wednesday, a company is considered to be predominantly engaged in financial activities if 85% or more of the company's revenues or assets are related to activities that are defined as "financial in nature" under the Bank Holding Company Act. The rule largely adopts the approach of an April 2012 proposal but includes some minor changes. Most noteworthy, the Fed decided that engaging in physically settled derivatives transactions generally will not be considered a financial activity. The change was meant to protect companies that use derivatives to hedge against supply price changes such as farmers and manufacturers. Operations that attempt to profit from derivatives trading would still be classified as financial in nature.

The list of other activities that will be considered financial in nature include lending, investing for others, insuring against loss or harm, providing financial or investment advisory services, selling interests in pools of assets, underwriting, and servicing loans. The Fed's full list of activities takes up 12 pages.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs